Most dictionaries define “bottom line” as “the most important thing to consider”.
In financial circles it’s taken to mean a focus on profitability (the last line on a P&L accounts) or net worth (the bottom line of your Balance Sheet) rather than an obsession with sales (the top line on a profit statement).
Sales/turnover is obviously a key element of your business activity and meeting sales targets is usually uppermost in the minds of most small business owners.
However, profits – particularly profits retained in a business – are the cheapest way to maintain and increase net worth and cash flow.
Without retained profits, you will need to increase borrowings or capital introduced to maintain your balance sheet bottom line.
If you succeed in retaining profits this will have an immediate, positive impact on net worth, and eventually, will help you reduce debt (borrowings) and increase cash flow.
A focus on sales should always be accompanied by a keen interest in the bottom line indicators. Most accounts software will make these numbers available at the click of a mouse. If you need help to discover how your account’s software could produce indicators that will help you better manage your business during the present difficult times, please call, we can help.
